MoneyWeek’s comprehensive guide to the best of this week’s share tips from the rest of the UK’s financial pages.
Three to buy
The Sunday Telegraph
This business-to-business media group has changed beyond recognition in recent years thanks to frenetic deal-making. Gone are Health Service Journal and Nursing Times, to be replaced by digital tools that help brands monitor e-commerce data and marketing effectiveness. The “changing face of advertising” has left media investors hungry for services that promise to boost the top line, making Ascential worth “tucking away” for the long term. 362p
The Sunday Times
These days people prefer to rent through the “sharing economy” rather than buy. What is true of Uber and Airbnb is also true of the construction industry. Enter Britain’s equipment-hire business Ashtead, which makes about 85% of its sales in the US. Fears of a slowdown have hit the shares, but Ashtead says there are no signs of weakness on the ground, and a more dovish Federal Reserve should bolster US growth. 2,047p
The Mail on Sunday
The United Nations estimates that food production will need to rise by around 70% over the next 30 years to accommodate a growing and wealthier global population. Fertiliser will be a crucial part of meeting that challenge, but the necessary potash component is generally found in remote parts of Canada and Russia. This Aim-listed firm is developing a mine in Morocco less than 40 miles from the coast – a “significant competitive advantage” that keeps costs low. It will be several years before production begins, so investors will require patience. 3p
Three to sell
Motley Fool UK
BT’s stock is trading on a forward price/earnings (p/e) ratio of just 8.4 and yields 7%, making it one of the most lowly-rated businesses in the FTSE 100. Yet value investors should remember that sometimes things are cheap for a reason. The group is fending off rising competition and trying to appease regulators. A “stretched balance sheet and falling earnings” are further worries. A gigantic pension deficit is “bigger than the market capitalisation” of most FTSE 100 firms and the generous dividend payout is “living on borrowed time”. 214.5p
This private-label product manufacturer supplies own-brand toiletries and household products to big British and European retailers. The share price has plunged after management warned that this year’s pre-tax profit would come in 10%-15% lower than last year. The group’s margins have been “flushed away” by higher raw-material and distribution costs and it has limited scope to raise prices. Brexit adds further uncertainty to the outlook. 96.75p
Recent performance at the owner of British Gas has been “dire” and the problems are likely to continue. The big-six supplier makes 61% of gross profit from consumer sales, but lost 249,000 customers last year amid heightened competition. A more hostile regulatory environment – witness the advent of the energy-price cap – hardly helps. It is also looking “increasingly likely” that the 12p per share dividend will be cut. 119p
…and the rest
The Daily Telegraph
Pioneering medical equipment manufacturer Smith & Nephew is a “quality business” that should benefit from the population ageing and growing demand for its products in emerging markets (1,425p).
Highland Gold Mining offers a 5.2% forward dividend yield and an “excellent record of shareholder returns” for those willing to bet that the “barbarous relic” is due a comeback (163p). International ingredients, flavour and fragrance business Treatt is well placed to tap into the hunt for alternatives to sugar (440p). A profit warning from Telford Homes may provide an entry point into a business exposed to the growing build-to-rent sector (345p).
Drug services group UDG Healthcare is gaining momentum in America and benefiting from strategic acquisitions, but the market has yet to spot the recovery (585p). Murray Income Trust has grown its dividend every year for the last 45 years and currently yields 4.3% (768p). A broader de-rating of the global gaming sector has seen shares in Frontier Developments halve. Investors with large risk appetites and patience may spy a cheap entry point into a high-growth business (849.5p).
The backlash against plastics has weighed on shares in packaging makers, but Mondi’s paper-bags operation makes it well positioned to benefit at the expense of rivals (1,728.5p). Data and analytics specialist Relx’s consistency and stable growth make it a core holding for institutions, but it is unjustifiably neglected by retail investors (1,712.5p).
A German view
Few analysts pay attention when a company releases a long-range forecast, says Germany’s Focus Money. When it comes to Bechtle, however, they make an exception. The IT services group, which offers more than 70,000 hardware and software products in areas including big data, cybersecurity and cloud computing, has a habit of meeting its long-term goals. It now says it wants to double sales to €10bn in the next 12 years (implying annual growth of 6.3% until 2030) and maintain its pre-tax profit margin of 5%. This seems plausible in view of the momentum provided by the structural growth in the key sectors it operates in. The stock is on a price-to-sales ratio of just 0.8.
US ride-sharing app Lyft will soon become one of the first major tech names to list on Nasdaq this year. Its initial public offering (IPO) prospectus was released late last week. Lyft didn’t say how much it hopes to raise and the valuation it expects to achieve; in its latest private fundraising it attracted $600m and was valued at $14.5bn. Active users have increased sixfold since mid-2016, although rising costs meant it lost $911m on $2.1bn of sales last year. By the end of 2018, it had 39%of the US ride-sharing market, a gain of 17% in two years. Lyft will operate a dual-share structure, which gives its founders more control, and will let some of its 1.9 million drivers scoop up some shares too.